Russian Retail-Sales Growth Probably Slowed on Inflation Pickup

Russian retail-sales growth probably
slowed in December as inflation accelerated to the fastest in
three months, while wages and investments may have increased the
least since September.

Receipts at merchants advanced 4.3 percent from a year
earlier, compared with 4.4 percent in November, according to the
median estimate of 15 economists in a Bloomberg survey. Wages
adjusted for inflation increased 6.8 percent, and investment
grew 0.8 percent, separate surveys survey showed. The Moscow-
based statistics office will publish the data this week.

Russia, the world’s largest emerging-market economy to
raise borrowing costs last year, is struggling to reverse a
slowing economy as accelerating inflation and a cooling job
market damp consumption. The weaker demand may embolden the
government’s push for lower borrowing costs, which is being
resisted by the central bank.

“The fourth quarter was weak and the first quarter risks
being even weaker as slowing domestic demand and a high base
effect in the first half of 2012 will be key headwinds for GDP
growth,” Dmitry Polevoy, a Moscow-based analyst at ING Groep
NV (INGA), said by e-mail. “We think the central bank will stay on
hold in the coming months despite mounting pressure from various
government officials and bankers.”

Economic growth slowed to 2.4 percent in the fourth quarter
compared with the same period a year earlier, the weakest pace
since the start of a post-recession recovery in 2010, according
to the median estimate of 15 economists in a Bloomberg survey.

‘Huge Argument’

Expansion may accelerate to 3.7 percent this year from 3.6
percent in 2012, with the risk of an abrupt end to “rapid”
retail-lending growth, the International Monetary Fund said
yesterday.

The central bank is resisting calls to cut interest rates,
sparking a “huge argument” with the government over
priorities, First Deputy Prime Minister Igor Shuvalov said in a
Jan. 18 interview. The government has been increasingly vocal in
its debate with Bank Rossii, with Finance Minister Anton Siluanov and Deputy Economy Minister Andrei Klepach arguing for
easier credit last week.

Easing monetary policy with lower rates would be
“counterproductive” and “likely to produce new imbalances,
new risks for different segments of the economy,” central bank
First Deputy Chairman Alexei Ulyukayev said Jan. 16 in comments
at the same economic forum where Siluanov and Klepach spoke.

“In response to the emerging risk of overheating in retail
lending, the central bank should stand ready to implement
further prudential measures as needed, in addition to those
recently announced,” the IMF said.

Inflation quickened to 6.6 percent in December, matching
the highest level since November 2011 after bad harvests from
the U.S. to Russia drove up food costs and delayed utility-price
increases took effect.

Car sales in rose 21 percent last year to $71 billion,
PricewaterhouseCoopers said on Jan. 22. Growth may slow to 3
percent annually in 2014-2017, it forecast.

‘Less Concerned’

“Last year, people became less concerned about the crisis
and their job security, and secondly, banks were willing to
offer loans to the population,” Vladimir Tikhomirov, the chief
economist at Otkritie Financial Corp., said by phone from Moscow
yesterday. “Retail loans could grow 15 to 20 percent this year
which is basically half of the level seen last year. On retail
sales, I forecast growth of 3.5 percent to 4 percent.”

Real wages probably increased 6.8 percent from a year
earlier, slowing from 7.3 percent the previous month, according
to the median estimate of nine analysts in a Bloomberg survey.
Disposable incomes also grew more slowly, rising 4.5 percent
compared with 6.7 percent, another survey showed.

The unemployment rate may have risen to 5.6 percent, the
highest in eight months, from 5.4 percent in November, according
to the median estimate of 13 economists polled by Bloomberg. The
increase was mainly due to seasonal reasons, Alexander Morozov,
chief economist for Russia at HSBC Holdings Plc (HSBA) in Moscow, said
in an e-mail.

“This weakness will likely spread into 2013, at least the
first half, for reasons including somewhat faster inflation,
moderation of consumer retail growth and weaker consumer
confidence,” Morozov said.